- US Nonfarm Payrolls fall short of expectations at +80K, but previous month upwardly revised by nearly 35%; unemployment falls to 9.0%;
- EUR under pressure ahead of Greek confidence vote; G20 unable to agree on further IMF funding;
- Commodity currencies are weaker on reduced outlooks for both economic growth and inflation; CAD pares weekly gain after Canadian unemployment rate jumps to 7.3%.
The US Dollar is stronger against nearly all of its major counterparts this morning on renewed concerns over the Eurozone economies. Fears that the region is inevitably headed towards recession overshadowed a less than stellar payrolls report out of the US. The all important nonfarm payrolls report was released this morning, showing a gain of 80K jobs in October versus an expected addition of 90K. However, the previous reading was revised sharply higher to 158K from 103K, a positive indication for today's somewhat disappointing reading. The manufacturing sector added more jobs than anticipated, but private payrolls fell short of forecasts by nearly 20%. Nevertheless, the unemployment rate ticked down to 9.0% from 9.1%, the lowest reading since March. While the report is encouraging, it does highlight Fed Chairman Bernanke's dissatisfaction with the frustratingly slow pace of recovery. However, with market participants focused on the Eurozone, the USD is headed into the weekend within its ranges against most of its peers.
The EUR pared much of yesterday's gains this morning after German Chancellor Merkel told reporters that the G20 failed to agree on increasing IMF resources. Meanwhile, the Greek debt struggle has come to a head in a political fight with the opposition parliamentary party calling for a confidence vote on PM Papandreou. Yesterday, the Greek PM reversed earlier calls for a referendum on the Eurozone's bailout for the embattled nation, but Papandreou's political opponents still want the leader out. However, an interim government is no sure sign of success as the further austerity measures that come as preconditions of the Eurozone's bailout funds will likely only further aggravate an already hostile populace. Meanwhile, should Papandreou scrape through the confidence vote and retain his post, the uncertainty over the bailout would likely prompt investors to shift capital out of a number of Eurozone nations en masse including not only Greece, but also Spain, Italy and possibly even France. Until there is a concrete decision, investors appear unwilling to take substantial positions on the EUR to either side.
Sterling is lower this morning against the USD, but stronger against the EUR as the Eurozone debt crisis continues. The much anticipated G20 summit did little to assuage investor fears with the leaders of the world's largest economies still unable to build consensus on how to resolve the region's woes. While the pound has found support in increased demand for British government bonds, risk aversion has capped any upside potential. British leaders are clearly focused on Greece with David Cameron telling his G20 counterparts this morning that the world can't wait for the Eurozone to go through endless questions about this. We want this resolved, and we want it resolved quickly.
The JPY pushed lower within its new weaker ranges against the USD overnight as it appears the BoJ's recent bout of intervention may prove to be the most effective yet. It's estimated that the central bank sold approximately 8T JPY on October 31st after the Eurozone concerns pushed the yen to 75.35 against the USD, the strongest since WWII. It appears that the sheer size of the intervention may have absorbed most of the demand from Japanese exporters looking to sell dollars, but the yen's role as a safe-haven asset will continue to provide support in the near term.
The Commodity Currencies are generally lower this morning as stocks and commodities begin the morning in the red. Crude pared some of its recent gains, pulling back to $93.40/bbl, gold fell to $1752/oz, and copper dropped to $355/lb. The CAD fell further away from parity with the USD this morning after disappointing labor reports out of both Canada and the US. The Canadian unemployment rate jumped to 7.3% after the net change in employment unexpectedly dropped by 54K versus an expected gain of 15K. The AUD and NZD are lower this morning, both heading for a weekly loss after the RBA lowered its forecasts for economic growth and inflation, suggesting that the central bank may ease monetary policy further in the coming months. The ZAR is also lower against its counterparts on the persistent fears over the Eurozone, the main destination for South African exports, but is still headed for a weekly gain after the ECB unexpectedly cut interest rates yesterday.
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This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.